Analysts Can't Agree on Gas Price Peak

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Analysts Can't Agree on Gas Price Peak

04/30/2007

WASHINGTON -- While the average price for a gallon of regular gas at the pumps stood at $2.90 on Friday, other areas of the nation were suffering much higher prices -- upwards of $3 a gallon in areas such as Oregon with $3.18 and Washington with $3.20 per gallon. The difference is causing much speculation by industry experts, who are being probed for a prediction of how high gas prices will rise this summer.

"There's every indication that we'll set a new record, probably sometime this week," Janet Ray, spokeswoman for AAA-Washington, told The Seattle Times. "The question is, how much higher will they go?"

Some feel that $4 per gallon could be reached at any time. "I am in the camp that we will go higher, perhaps a lot higher. I think we are one disruption or problem away from $4-a-gallon gasoline," Phil Flynn, oil analyst for Alaron Trading, a Chicago-based commodities trading company, told the newspaper.

Other industry experts feel that we have reached the peak.

"We're creeping back up toward $3 ... but should there be no geopolitical, political or refinery upsets, I think that the peak for gasoline is in sight," Andrew Lebow, senior vice president of the energy division at Man Financial Inc. in New York, told the McClatchy-Tribune. "However, because things are so tightly balanced, one major plant going down is going to have enormous impact on the price."

The government's prediction on the peak price has already been beat. Last week, the Energy Information Administration (EIA) estimated that the average peak in gas prices will be in May at $2.87 per gallon.

In some areas of the country, gas prices are surging ahead, due to pipeline problems and lessened supply. In the Denver area – which was crippled when storms left gas tanks empty in January and a Valero refinery closure left them stranded again in early April – prices are rising to upwards of $2.99 per gallon and some stations are running out of fuel, as the supplies in the area have not returned to normal.

"There is no gas in Denver," Bryant Gimlin, energy risk manager at Fort Lupton-based Gray Oil Co., told the Rocky Mountain News. "The situation here is worse than how it was after Hurricane Katrina."

Several metro-area stations ran out of fuel in recent weeks, covering pump handles with plastic bags and diverting drivers to nearby stations, the report stated.

"No doubt we will have $3 a gallon," said Roy Turner of the Colorado Wyoming Petroleum Marketers Association. "We are going into the peak driving season with the lowest inventories we have had. It doesn't look good right now."

If prices do hit new peaks this summer, consumers might not think twice about their daily driving habits, but it could push them to think about their long-term fuel consumption, according to Laurie Falter, industry economist with the EIA.

"Most of people's trips are not things they can change in the short term," Falter said. "What are they going to say, ' ... I'm not going in to work anymore'?'' she told the paper.

"When you look at the big picture," said Alaron's Flynn, "the trends are very discouraging. We haven't seen a drop in supply like this since the early '90s, and it is happening at a time when the demand for gasoline seems like it is not going to retreat."